CHESSNOID

I was actually considering buying this stock in the near future just a month ago. I have actually owned this stock in the past 20 years, used their products and services, and have even been a bank teller for them during my college years. I don’t know if they will make it now.

They just announced a giant layoff of over 50,000 employees worldwide. That in itself is not just shocking but a warning sign. I have always felt the company in recent times had been cooking their books in regards to these mortgages. I think this current downtrend in their stock prices is a reflection of their true performance of recent times.

Wall Street Journal:

Following steep drops all week, Citi’s shares shed another 26% Thursday, even after Prince Alwaleed bin Talal, a large and longtime shareholder, said he plans to increase his stake in the bank. Big stock-price declines at other banks — J.P. Morgan Chase fell 18% Thursday — are likely to be equally unnerving for the authorities.

The market appears to be in a game of chicken with the government over Citi. At issue: whether government guarantees on bank debt and the recent preferred-equity injections from the Treasury will be sufficient to get banks through the crisis.

Citi says it is adequately capitalized and has sufficient liquidity. But if the share-price rout continues, one option for the government is to plow extra capital into the banks in return for more preferred shares. This time, the government could even sweeten the terms, perhaps requiring a lower dividend than the 5% on its existing preferreds — in an explicit attempt to reverse the share-price falls.

The political risk of giving banks basically free money is huge. And even that mightn’t do the trick. Paul Miller, bank analyst at FBR Capital Markets, notes preferreds don’t reduce the amount of leverage piled on top of common shareholders. And right now, Citi’s assets exceed its tangible net worth — shareholders’ equity minus intangible assets and preferreds — by 56 times, compared with 49 times for Bank of America.

If you look at a 2 year stock chart of its price history, it really would have been hard to jump ship. You figure Citi was literally too big and too global to fail and yet here we are at the brink of either a bankruptcy, bailout, or a sell off of all its parts.

The good news is I didn’t own any and I still haven’t bought any. Trust me I was tempted.